Peregrine Founder Wasendorf Pleads Not Guilty to Charges

Aug. 17 (Bloomberg) -- Russell Wasendorf Sr., the Peregrine
Financial Group Inc. founder, pleaded not guilty to 31 counts of
lying to U.S. regulators about the value of customer funds held
by his now-bankrupt commodities firm.

Wasendorf, wearing leg irons and handcuffs and dressed in
an orange prison uniform, appeared in court today in Cedar
Rapids, Iowa, where federal public defender Jane Kelly entered
the plea on his behalf.

“At this time, not guilty to all counts,” she told U.S.
Magistrate Judge Jon Scoles during a hearing that lasted less
than five minutes. Wasendorf, 64, told the judge he understood
the indictment. Scoles set a tentative trial date for Oct. 15.

Wasendorf was indicted by a federal grand jury on Aug. 13.
He’s accused of making false statements to the U.S. Commodity
Futures Trading Commission in the firm’s monthly and annual
reports to the agency from February 2010 through June 2012.

The charges carry a maximum punishment of 155 years in
prison and a $7.75 million fine.

The CFTC sued Peregrine and Wasendorf on July 10, accusing
them of stealing at least $200 million in customer funds. The
Cedar Falls, Iowa-based firm filed for bankruptcy court
liquidation in Chicago later that day. Wasendorf was arrested
July 13.

Suicide Attempt

Before a failed suicide attempt on July 9, Wasendorf wrote
a confession in which he said he had been embezzling from
Peregrine for almost 20 years, according to an FBI agent’s
affidavit filed with the Cedar Rapids federal court on July 11.

“I have committed fraud. For this I feel constant and
intense guilt,” said Wasendorf, the firm’s chairman and chief
executive officer, according to the affidavit of Federal Bureau
of Investigation Special Agent William Langdon.

“Through a scheme of using false bank statements I have
been able to embezzle millions of dollars from customer accounts
at Peregrine Financial Group Inc.,” he said, according to
Langdon. “The forgeries started nearly 20 years ago and have
gone undetected until now.”

While hospitalized after the suicide attempt, the CEO
admitted to stealing at least $100 million from Peregrine,
Langdon said.

Guilty Plea?

Wasendorf’s plea of not guilty today may be a prelude to a
negotiated guilty plea later, criminal defense lawyer Douglas T.
Burns said today. Burns isn’t connected to the Peregrine case.

“At the initial appearance to answer an indictment, a not
guilty plea is a legal formality,” he said in an e-mail.
“Given his extensive written admissions, I expect that a guilty
plea will be entered.”

Peregrine’s Chapter 7 bankruptcy petition lists more than
$500 million in assets and more than $100 million in
liabilities. Some of more than 10,000 creditors have already
sued Wasendorf and other executives.

Wasendorf has been in custody since his arrest. U.S.
District Judge Rebecca Pallmeyer in Chicago, who is presiding
over the CFTC’s lawsuit, has appointed a receiver to marshal and
liquidate Wasendorf’s holdings.

The criminal case is U.S. v. Wasendorf, 12-cr-2021, U.S.
District Court for the Northern District of Iowa (Waterloo). The
bankruptcy case is In Re Peregrine Financial Group Inc.,
12-27488, U.S. Bankruptcy Court for the Northern District of
Illinois (Chicago).

The regulatory case is Commodity Futures Trading Commission
v. Peregrine Financial Group Inc., 12-cv-5383, U.S. District
Court, Northern District of Illinois (Chicago).